Henry decomposes output per capita into output per hour worked times hours worked per working-age person times the proportion of working-aged people in the population. He calls these factors the three P's: productivity, participation, and population.

One of his main points is that Australia is suffering from weak participation relative to Japan, with the difference offset and disguised by demographic shifts.

Australia's total participation rate is higher than Japan's. But if you look at the age-specific participation rates you can see that in every age cohort, the Japanese participation rate is higher than ours. And at ages 55 and over the gaps are very large.

I would caution that for some of the P's, particularly productivity, one can get somewhat different cross-country comparisons using just the latter half of the 1990's as the time period of analysis, rather than using the 1990's as a whole.

For Discussion. As populations age, will countries need to consider raising the retirement age in order to maintain growth in GDP per capita?

Comments and Sharing

I have consistently argued that governments will indeed have to continue raising the retirement age. After all, we live far longer today than was expected when these programs were originally conceived. Let us not forget that the average American man died at about 45 in 1900. We now have the bizarre situation where many folks will receive retirement benefits longer than they actually worked!

Alas, I must return to the awkward earlier point that this discussion primarily revolves around blue collars. Well educated professionals rarely, if ever, really retire. It is the factory worker with limited skills who ceases to contribute after they reach retirement age.

Just a few months ago, this scholar released another book, “The Crisis of Islam: Holy War and Unholy Terror.” Lewis is the quintessential example of a white collar professional who did not simply retire and go off to pasture to die.

Blogging software: Powered by Movable Type 4.2.1.
Pictures courtesy of the authors.
All opinions expressed on EconLog reflect those of the author or individual commenters, and do
not necessarily represent the views or positions of the Library of
Economics and Liberty (Econlib) website or its owner, Liberty Fund,
Inc.

The cuneiform inscription in the Liberty Fund logo is the
earliest-known written appearance of the word
"freedom" (amagi), or "liberty." It
is taken from a clay document written about 2300 B.C. in the Sumerian city-state of Lagash.